You might still be working well into your 60s and even 70s to handle your mortgage payments, yet it’s still a pretty good idea to know what to do about mortgage payments when you do retire. When you’re near retirement age or have already retired, you might want to have a different type of mortgage plan since you’ll be making less money.
There are some strategies you can start to look into and actually take action on before retirement age to make sure your retirement years will be truly your golden years. Not every strategy will suit you, but at the very least, you want to know some of the options available for you.
For some people, downsizing is a solution. With children moving out and leading their own lives, you might no longer need a large house, or maybe you’re looking for a more suitable house or neighborhood as you age. If you can sell it and move into a smaller home, and live off the excess cash you have made, well and good.
If planning to downsize, it should be looked into earlier. What usually happens is that people postpone the decision year after year, until they reach an age where they believe they’re too old to change the house. Yet, it’s understandable that this option doesn’t suit many people as it means letting go of a home that they just might be too attached to, not to mention the community around them. Also, the financial factors to calculate just might be too much. That’s why there are still other options to look into.
Basically, equity release is a way to unlock and tap into the money of your property and turn it into a lump sum of cash or take smaller sums, as you need them, according to the plan you choose. Equity is the cash tied up in your home. You can do this via a number of policies. You don’t need to have fully paid off your mortgage to do this.
Retired homeowners in need of money can access some of the equity they’ve built up in their homes. The older you are at the time of borrowing, the more attractive interest rates are. This makes equity release a smart option for the over 70s group. According to the article entitled, Equity Release For The Over 70's No Upfront Fees – Low Rates from 1st UK Mortgages, an equity release allows homeowners over 70 to receive cash based on the equity in their home which will be repaid when they pass away. You want to look for a reputable firm to handle this. They could be a member of the Equity Release Council, though you could also find reputable companies who are not members. But there are fewer safeguards in place, which is why it’s advised to work with an independent equity release advisor who works with a panel of authorized partners that are members of the Council, as the No Negative Equity guarantee can then protect you.
This type of mortgage allows you to borrow some of the house’s value at a fixed interest rate. The cash you get is tax-free and you can spend it as you want. Moreover, you can retain ownership of your home and continue to live in it until death or if you go into long term care. Your house will usually be sold at this stage, and the money from the sale is used to pay off the loan. Interest is charged only on what you’ve borrowed.
Home reversion encompasses selling part or all of your home to a home reversion policy provider in exchange for a cash lump sum. This is typically higher than the amount you can raise from a lifetime mortgage. It means that all or part of your home will belong to someone else, but you can remain living there all your life, rent-free. There’s no interest to pay for home reversion plans aren’t loans. The main difference between home reversion and lifetime mortgage is that you are actually selling a part of your home in home reversion in exchange for cash or a lifetime of regular income, and still live in the house.
It used to be cause for celebration when you finish paying off your mortgage. Yet, now, an increasing number of older people prefer to have a mortgage. Even if they have the means to buy a new place with cash, they are choosing to take advantage of predominant low-interest rates and tax breaks instead. In doing so, they’re able to free up their savings for other uses for their golden years.